Bolivia grabs oil profits by new tax

Gas and oil taxes will be raised, and oil producers will be forced to accept changes to existing contracts as the Bolivian government Tuesday night enacted a new law that has foreign companies operating in the South American country very concerned.

Global companies that operate in Bolivia, including BP, British Gas, Petrobras, Repsol, and Total, are starting to look at strategies to limit the impact of the new law on their operations.

Some companies are looking at going to arbitration, but at least one analyst has said that any company that takes that route will probably find it very difficult to operate in the country afterward.

The new law imposes a non-deductible 32 percent tax at the wellhead in addition to the current royalty of 18 percent. The law also takes title for gas resources from the companies; one interpretation of this provision of the law is that companies would be violating the law if they export gas from the country.

But one of the most upsetting provisions of the new law, especially for foreign companies in Bolivia forces them to accept government-imposed agreements on risk-sharing in place of the agreements already contracted for.

These changes would have to be agreed to within 180 days of when the law goes into effect.